What are the differences in accounting for a forward contract used as a fair value hedge of (a) a foreign currency denominated asset or liability and (b) a foreign currency firm commitment?

Q: Explain the foreign currency swaps and why are they undertaken? Explain the functional currency and…

A: A foreign currency swap, also known as an FX swap, is an agreement between two foreign parties to…

Q: the reporting of FX. What are the major differences in foreign currency accounting standards between…

A: Foreign currency Translation In the Foreign currency Translation the determination of functional…

Q: What is foreign trade balance?

A: Answer: A foreign trade balance is nothing but the net dollar value of commodity exports minus…

Q: In what way is the accounting for a foreign currency borrowing more complicated than the accounting…

A: The accounting for a foreign currency borrowing involves keeping track of two foreign currency…

Q: Answer true or false to the following statement and explain: “Investors engage in forward exchange…

A: The exchanging of one currency for another is known as Foreign Exchange (forex or FX). For example,…

Q: How do companies report foreign currency derivatives, such as forward contracts and options, on the…

A: Currency derivatives refers to the financial contracts involving two parties, buyer and seller which…

Q: If the underlying transaction gives you denominated in a foreign currency, the general principle…

A: If the underlying transaction gives a denominated in a foreign currency,  the general principle…

Q: which of the following is correct regarding the sale or exchange of virtual currency: A. no gain or…

A: A financial asset is also subject to the taxation even nowadays trending of the asset which is…

Q: Describe about the foreign currency risk.

A: Foreign currency- As we know every country has its own currencies in which it operates. Hence,…

Q: Define spot, forward, and swap transactions in the foreign exchange market and give an example of…

A: The foreign exchange market (also known as the Forex or FX market) is a decentralized global market…

Q: How does the interest rate parity condition Maintain equilibrium in the foreign exchange Market?

A: The question asks how the interest rate parity (IRP) condition helps keep the foreign exchange…

Q: Which of the following refers to exposure netting?  1. It is a strategy based on adjustments of the…

A: exposure netting is defined as a method of hedging transaction risk by offsetting exposure in one…

Q: Do U.S. GAAP and IFRS differ in the criteria they use to determine whether a transfer of receivables…

A: International Financial Reporting Standards: They are commonly known as IFRS. It is a set of…

Q: Which of the following items will result to foreign currency transaction gain/loss due to settlement…

A: Gains or losses from remeasurement are generally reported under net income, while foreign currency…

Q: Do the pros of Investor-State Dispute Settlements outweigh its cons?

A: Investor-State Dispute Settlements (ISDS) are controversial mechanisms included in international…

Q: Comprehensive income includes items not included in the computation of net income, such as foreign…

A: The income statement is the one prepared by the company to determine the net income/ loss that the…

Q: When preparing an income statement, which of the following items would most likely be classified as…

A: Solution: Unrealized gain on trading securities and realized gain on derivative contract are…

Q: How are derivatives valued on the balance sheet? How is the adjustment to fair value recorded…

A: Derivatives: This is the financial instrument used  for managing risk and safeguard the risk created…

Q: does it reduce forei

A: Financial instruments can be regarded as capital bundles that can be traded, or as assets that can…

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.